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The expansion into new market regions is an advantageous possibility to grow business and increase competitive edge for many online shops. Different factors should be weighed when online retailers are considering going global and need to develop an international payment strategy. Certain priorities and expenses may rise during the process. Installing new payment mixes, technical connections and management of fraud risks play large rolls choosing a strategy.

Payment methods in specific countries

A consumer survey performed by Pro Gruppe showed that up to 50% of consumers questioned would interrupt the purchasing process if the country-specific method of payment was not available. This means that choosing the proper payment mix for a country is a deciding competitive factor.

When choosing a payment service provider, it is important to pay attention to payment methods that are offered in the countries you wish to target with your online shop. A global, wide-reaching PSP may be too extensive and pricey for an online shop that will only target two markets. For a global player, this type of provider can be very advantageous. In theory, the three most important methods of payment should be able to be mapped.The conversion rate is optimized with the most common five to seven payment methods of a country.

Example: Cross-border transactions in France

France is an important market for German shops. The payment behavior in France is very different than in Germany. While direct debit and purchase on account are very popular methods of payment in Germany, the French tend to use credit cards such as Mastercard and Visa, as well as debit cards including Carte Bleue and Carte Bancaire when they order products from online shops. The debit card system allows for purchases without payment authorizations from banks. Payment in installments is also more popular here than in other countries. Direct debit and purchasing on account are only available in a small amount of online shops as a method of payment.

Example: Cross-border transactions in the Netherlands

Dutch customers also order many products from German online shops. The most common method of payment in the Netherlands is a national online transfer process. Payment by credit card are not used as much. 80 percent of all residents of the Netherlands pay over Ideal. This payment method redirects customers to their banks and then authorizes the transaction data by requiring the customer to enter their account number and their so-called “two factor certification”. The retailer then receives a confirmation of payment after this process is completed.


Fraud Management: Fraud risk management in the international payment industry

Growing internationally also leads to a higher risk of payment fraud. The biggest risk of fraud in international transactions is credit card theft. For example, when an online shop is only active in Germany, the risk of fraud can be minimized because the shop only allows credit cards registered in Germany to complete transactions on the website. Through internationalization, additional security measures must be taken by retailers to avoid the increased risk of fraud.

Credit card payments with 3D Secure

In countries vulnerable to security risks, retailers can use 3D Secure to complete credit card payments on their online shops. MasterCard uses the “MasterCard SecureCode”, while Visa labels this step as “Verified by Visa”. Customers must verify their information during the payment process through entering an additional password on their bank’s website.

Minimizing fraud through blacklisting

A blacklist is a databank that stores name and account information of customers who are rated negatively through insolvency and unpaid invoices. A global blacklist is available for credit cards registered as stolen. In addition, there are blacklists provided by credit agencies, retailer communities and payment service providers. Retailers can use a PSP that takes over the surveillance of shop transactions and other payment risks. For optimal conversion rates, an equilibrium between security and comfort must be found.

Additional fees in cross-border business

With international transactions, additional costs can arise and should be expected. In credit card transactions, interchange fees will accrue. If the credit card belongs to a bank in another country, this fee will be even higher.

Due to currency weaknesses, the costs for a currency conversion may sometimes be difficult to calculate. Prices may vary in during different periods of time. Certain banks and PSPs update these daily, while others update weekly.

Other costs such as bank fees and direct debit costs are also higher in international transactions. Payment service providers can calculate these costs individually based on the country and method of payment in order to create transparency in the overall costs of payments.

Technical connections in internationalization

Transactions with currency conversions must be executed and navigated separately. This separate connection is a more complicated facility to deal with and manage. Payments are sent through in the same currency, but retailers should still consider if a separate connection should be created for each country and, if necessary, per payment type. This offers the possibility to evaluate payment methods and optimize them to protect against fraud and achieve the best conversion rate.


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